Despite notable differences in the insolvency environment across countries, B2B payment default rates in Western Europe remain quite significant. This is expected to slow the still weak economic recovery, particularly of the Eurozone, and keep insolvency rates well above 2007 levels.
Around 40% of the total value of domestic and foreign B2B invoices issued by respondents of the latest edition of the Atradius Payment Practices Barometer survey for Western Europe, was defaulted on. On average, 7% remained outstanding after 90 days past due, raising the likelihood of becoming collections cases, and 1.2% was uncollectable. Survey respondents in Italy and Greece appear to struggle the most with overdue and uncollectable receivables. Respondents from Denmark and Sweden show the strongest focus on receivables management.
The Atradius survey of B2B payment practices surveyed approximately 3,000 businesses in 13 Western European countries. In addition to the payment behaviour of domestic and foreign customers, the survey looked at challenges to profitability and DSO.
Within the still difficult business climate in many Western European countries, liquidity problems remain the primary reason for payment delays (51.4% of survey respondents in respect to domestic and 37% in respect to foreign customers). This is most often experienced by respondents in Greece (84.0% in respect to domestic and 57.1% in respect to foreign customers) and Italy (73.0% domestic and 48.3% foreign). Nearly the same percentage of the respondents in Western Europe, who reported late invoice payment due to customers' liquidity issues, expressed the opinion that outstanding invoices are used as a source of financing. This was noted most often in Austria (54.2% of respondents in respect to domestic and 49.2% in respect to foreign customers).
Regardless of the reason for B2B customers delaying invoice payment, the administrative and financial costs of overdue receivables can be considerable for suppliers, and can erode business profitability. It also supports the contention of 24% of the respondents in Western Europe that cost containment will be their biggest challenge to profitability in 2015. This is of greatest concern in Switzerland, the Netherlands, France and Italy. Respondents in Great Britain and Ireland, in contrast, expect maintaining adequate cash flow to be their biggest challenge this year.
Andreas Tesch, Chief Market Officer of Atradius N.V. stated, "The modest economic recovery seen last year, and continuing this year, has only limited impact on the high levels of payment defaults and insolvencies, particularly in the Eurozone. We expect improvement in some markets like Spain, the Netherlands, Belgium and United Kingdom, but in most markets our 2015 forecasts are for insolvency levels levelling off, and in some cases deteriorating. In the current business climate, it is therefore essential that companies focus on receivables management and credit insurance, to avoid cash flow problems that might set back their business."
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